UK's anti-money laundering system needs re-ordering, warns Treasury Committee

The Treasury Committee has published an unanimously-agreed report, Economic crime – Anti-money laundering supervision and sanctions implementation. 

In its report, the committee urged the government to provide more precision on the potential estimate of the size and scale of economic-related crime in the UK, and the exposure of different sectors to it.

"It is exceptionally difficult to measure economic crime, given those undertaking it are actively trying to hide it. The committee does not doubt the will of the authorities to combat economic crime," the report reads.

"However, it considers there to be merit in attempting to measure its extent, since greater understanding of the scale of the problem will allow those responding to provide sufficient resources to tackle it, and potentially highlight where those resources should be targeted."

The Treasury Committee judged that the UK’s departure from the European Union, which will result in a change in international trading relationships, may lead to more economic crime. 

"The UK must remain alert to that risk, including when it conducts trade negotiations. The government must be consistently clear about its intention to lead in the fight against economic crime, and not compromise that in an effort to swiftly secure new trading relationships," the committee noted. 

According to the committee, the government should retain, or replicate, the arrangements with the EU to maintain the flow of information to UK law enforcement agencies on economic crime. 

Moreover, the committee explained that the property sector poses a risk from an anti-money laundering perspective, noting that the AML supervisory regime around property transactions is complicated. 

"Banks are supervised by the Financial Conduct Authority, solicitors by their relevant professional body, and estate agents by HMRC. While there may be debate over which part of the transaction chain bears most responsibility from an AML perspective, each part has a role in reporting, or preventing, a transaction that may be used for money laundering.

"There is a risk that some estate agents may be unsupervised, having not registered with HMRC. We recommend that HMRC carries out further work to ensure estate agents are registered with them and following best anti-money laundering practice," the committee explained. 

It advised that there must be no weak areas in the UK’s systems for preventing economic crime.

"At present, Companies House presents such a weakness. The UK cannot extol the virtue of a public register of beneficial ownership and yet not carry out the necessary rigorous checks of the information on that register," the commission said. 

"The government must urgently consider reform of Companies House to ensure it has the statutory duties and powers to ensure it plays no role in helping those undertaking economic crime, whether here or abroad."

Furthermore, the commission judged that though the emphasis had been on the risk presented by enablers, such as accountants or solicitors, there should also be a sharp focus on the supervision of the core financial services. It added that the FCA needs to ensure that it keeps up a constant pressure on the core financial services businesses and take appropriate enforcement action against them.

HMRC should also properly consider whether it should retain its role in anti-money laundering supervision, the commission cautioned, adding that it supported the role that the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), but believes that the government should create a "supervisor of supervisors". 

"There is a strong case for this to be OPBAS, given it already has a role in the coordination of the professional body AML supervisors, and a role in information sharing," the committee explained. 

"The government should then also consider moving the supervisory responsibilities of HMRC to OPBAS. This would reduce fragmentation in the current supervisory landscape and allow HMRC to focus on its tax authority responsibilities."

Other issues 

The committee also judged that the resources to combat economic crime available to the private sector dwarf those currently available to the public sector. 

"One significant issue is the maintenance of expertise in the public sector to undertake this work, considering the salaries available in the private sector," the Treasury Committee said. 

"The government and public sector bodies should consider whether there is the pay flexibility available to ensure that the appropriate skills are maintained."

It concludes that there is clear evidence that legislative reform is required to strengthen the hand of law enforcement in the fight against economic crime.